What is “white paper'' and how to read it?
Before making a decision to invest in any cryptocurrency project, it would be good to gather all the information about it. You can wait a long time for reviews from well-known bloggers or look for comments from the first-time buyers. But if you want to form your own opinion, the “White Paper” will help you.
The term “White Paper” (do not mess with the “white sheet”) originates from the end of the 19th century. At that time, the government of England began to distribute documents by color. White color meant that the document was available to the public. These could be clarifications to the proposed bills and government decisions. In the 90s of the last century, the term successfully established itself in the business sector and obtained a more advertising nature. Satoshi Nakamoto released the first white paper in the world of digital currencies in 2008, and it was devoted to the technology of Bitcoin - the first cryptocurrency.
“Whitepaper” is a technical document released by project developers that explains two main aspects - the project's purpose and the technology behind it.
This document contains various forms of data like charts and diagrams, statistics, calculations and formulas, as well as possible problems and their solutions. The purpose of this data is to convince prospective investors to invest in that cryptocurrency.
Well-written and well-thought-out “Whitepapers” have repeatedly attracted large investments at the start of the project. The most notable examples of successful technical papers are the cases of EOS, Ethereum, Tron, Ripple, DigixDAO and Quoine.
How to read a whitepaper?
A well-written technical document should consist of the following key points:
Reading a whitepaper is not difficult for an experienced investor. But, if you are a beginner, then you will have to devote your time to this. Firstly, you need to understand the basic concepts such as blockchain, mempool, consensus algorithms, hard fork and soft fork. It is not necessary to study them thoroughly, it is important to understand their meaning in general terms (this knowledge will be of use to you not only in terms of reading a whitepaper). Secondly, as an investor, you need to get answers to the main questions:
1. Understand why the project was created
It’s a rather simple question and the answer shouldn’t be complicated. It will give you an understanding of the project itself and of the problem it is trying to solve. The document should contain a clear market analysis that will show the demand for this product.
2. How does it work?
Sometimes complicated technical terms can scare any reader, but don't stop halfway. You can quickly learn unknown words and expressions using Google.
The whitepaper should explain to the reader how the technology of this project will work. If you have done your best, but it came to nothing, then the document does not cope with the task. This may indicate the incompetence of the project's team.
3. What will happen after the launch?
It is rather important to understand the further development of the given project. Carefully study charts presented in the document in order to understand the team's overall goals. Projects that are badly planned have little chance of success.
A white paper is a detailed document that should fully describe the structure of the project. Although whitepapers do not make for light reading, its main goal is to attract an investor. To start with, you can read whitepapers of those projects that you already know about (we advise you to pay attention to successful projects described above). It will help you understand how the document should look and know the terminology.
